The historically unloved mid market segment in the UK is set for another clearout as a couple of the existing corporates either sell-up or shed a significant chunk of their portfolios.
Macdonald Hotels is being tipped to unload 23 hotels for in excess of £400m and Jarvis Hotels is thought to be gearing up to again try to sell itself.
The eye-watering numbers being talked of for Macdonald’s portfolio, which was put up for auction at the start of summer, look to be enough to tempt the company to sell-off the hotels in their entirety.
Previously, Macdonald had been seeking a sale-and-manage-back. While this remains possible, the highest bidders are asking for vacant possession. Dawnay Shore, owner of the Paramount chain, and property group Moorfield, which has teamed up with another operator, are linked to bids.
Meanwhile, Jarvis, which halted its sale process a year ago, appears to be readying itself to once again start courting suitors by ploughing close to £50m into upgrading its properties.
The initial postponement is thought to have hastened the departure of the then chief executive Richard Thomason. Chairman John Jarvis’ wish to pause the sale rather than sell-out at a low price won the day.
Jarvis has been trying to transform itself into a management company. It was an early pioneer of the sale-and-leaseback phenomenon, having sold nine hotels to Lioncourt in 2002, prior to its delisting.
Another Irish investor, WG Mitchell, subsequently teamed-up with Sigma Capital to buy three of these hotels for £73m this summer. Sigma last week said that the deal generated fees worth £3.96m and that there are additional embedded fees, both transaction and incentive, which will be realised when the hotels are again sold.
WG Mitchell was also involved in a separate sale-and-leaseback deal announced last week, a £54m transaction involving two Apex hotels in Edinburgh, the International and the Grassmarket.
Apex is expected to use the cash to add to its already five-strong portfolio, the most recent opening being Seething Lane, near London’s Tower Bridge, which began trading just under a year ago.
Among WG Mitchell’s other hotel investments are the Radisson in Edinburgh and the Hilton in London’s Docklands.